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Oil surge boosts energy stocks – five experts weigh in

VIDEO3:1403:14
Oil stocks soared after a Saudi oil facility attack — Five pros on oil

Energy stocks are on fire Monday.

The XLE energy ETF surged 4% to begin the week after a drone strike on a Saudi oil facility squeezed global supplies.

Five experts weigh in on what this could mean.

James Camp, managing director of strategic income at Eagle Asset Management, said this spike in oil prices could be short-lived.

"If you're doing speculative oil trades based on commodity prices, I think it's a fool's trade and I would be very reticent to do that. Oil is not going to $100. The oil dynamics are not the dynamics of our youth and show. ... We do not have the same sort of shock in directionally higher rates in oil prices. This will be a very short-term phenomena just because of the massive capacity that has been built in both domestically and other players."

Kevin Book, managing director of research at ClearView Energy Partners, said it could take time for oil markets to stabilize.

"We're now talking about incredibly sophisticated one-off custom-built processing infrastructure. I think we're talking weeks to months before it's fully restored. I think it's a time for a lot of pragmatic flexibility on both sides of that divide and others. ... Some of the importers that have been forced to stop buying Iranian and Venezuelan crude might want to start buying it even though the risks of those sanctions are high. That might not be something the U.S. government condones, but they might tacitly accept it if prices began to climb back up."

Daniel Yergin of IHS Markit said there is still uncertainty as to what happens now.

"If we had been where we were 10 years ago, this would have been a much more panicky situation. If it is Iran then ... it's hard to believe that there's not going to be some kind of response. And I think the oil market, it will adjust to the fact that probably supplies are OK, the market is flexible. But the question that will hover over it will be how long does it take to repair the facility? And what happens next?"

Jason Hunter, head of U.S. equity technical strategy at J.P. Morgan, said this could give the rotation into value even more strength.

"A large part of the rotation since mid-August has been into value anyway — energy being the second-biggest component of the S&P 500 value sector. This just gives it a bit of a further tail wind in terms of the rotation. ... We suggested getting somewhat a bit more defensive and cash heavy in May as the headlines turned and our view has been if we're going to get this late-cycle rally extension it's going to come because there's a move to a better space with trade. That's going to allow cyclicals and things that are correlated to global PMI to move up."

Brian Nick, chief investment strategist at Nuveen, said it's still uncertain what kind of impact this could have on the U.S. economy.

"We came into this period underweight energy. Over the weekend, our analysts are recommending that we cut back on those underweights, if we're severely underweight energy because there's a potential for this to escalate, for the attacks to continue and for there to be a tit for tat that could potentially involve United States. I think it's ambiguous with respect to the United States' economy just how big of an impact this is going to have. I think it's less ambiguous that it's a negative for Europe and for China because they don't have the sort of import-export dynamic that we have where we are both a producer and an exporter of energy."

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